SanDisk (SNDK) reported a blowout fiscal Q2, with revenue more than quadrupling to $8.97 billion and earnings per share surging to $39.25, both well above analyst expectations. Yet the stock slipped in extended trading, extending a slide that has erased roughly 45% of its value since late June.
Why the market is selling the news
The primary culprit is the company's revenue outlook for the current quarter. SanDisk guided for revenue between $10.3 billion and $10.8 billion, with the midpoint falling short of the $10.82 billion consensus. While the adjusted EPS forecast of $45 beat expectations by 28 cents, the top-line miss was enough to trigger profit-taking after the stock had rallied over 30% into the earnings release.
Management attributed the softer guidance to the signing of five additional New Business Model (NBM) agreements during the quarter. These long-term structured supply contracts with hyperscalers provide pricing visibility and gross margin stability, but they also alter the timing of revenue recognition and delivery pacing compared to spot-market sales. As a result, quarterly revenue can appear lumpy even as the underlying business strengthens.
Buyback signals confidence
Despite the near-term headwinds, the company's board expanded its share repurchase authorization by $14 billion, bringing total remaining capacity to $15.5 billion. This move signals management's conviction that the stock is undervalued and provides a potential floor against further sell-offs. By reducing the share count at current levels, the buyback is expected to accelerate long-term EPS growth.
However, technical indicators remain bearish. SanDisk is trading decisively below its major moving averages, suggesting that sellers are in control across multiple timeframes. The stock's recent volatility is also reflected in options pricing, with SanDisk options pricing in a 14.9% swing as the NAND cycle faces a durability test.
AI demand underpins long-term story
Beyond the quarterly noise, the secular narrative remains intact. The rapid expansion of enterprise AI infrastructure requires massive, high-density flash storage, pushing hyperscalers toward structured commitments. This transformation positions SanDisk as an essential partner in the AI supply chain, rather than a volatile memory supplier.
Wall Street remains overwhelmingly bullish on the stock for the next 12 months, with many analysts viewing the post-earnings dip as an attractive entry point for long-term investors. The company's expanding capital return program and its role in the AI-driven storage boom are seen as key catalysts.
Still, some caution is warranted. The memory sector is cyclical, and the recent DRAM ETF is down 33%, with SanDisk, Western Digital, and Micron all under pressure. Investors should weigh the near-term guidance miss against the long-term structural demand story.
For those willing to look past the immediate volatility, the combination of a massive buyback, robust AI demand, and a beaten-down valuation could offer a compelling risk-reward profile. But as with any high-beta tech name, timing and risk tolerance are critical.
This article is for informational purposes only and does not constitute financial advice.
